Jawbone just lost a key part of its big case against Fitbit

The Fitbit Alta fitness tracker. Fitbit Fitbit did not steal Jawbone's trade secrets, according to a ruling issued on Tuesday by the US International Trade Commission (ITC).

The case began when Jawbone accused Fitbit of poaching its employees and using their knowledge of Jawbone's trade secrets. Jawbone also claimed that Fitbit violated some of Jawbone's patents. Jawbone's hope was that the ITC would ban Fitbit from importing its products to the US from its overseas manufacturing partners.

Jawbone and Fitbit make devices overseas and import them to the US.

The ruling means that Fitbit will be able to continue to import its products to the US and sell them.

"[N]o party has been shown to have misappropriated any trade secret," the ITC ruling reads.

"We are pleased with the ITC's initial determination rejecting Jawbone's trade secret claims," said Fitbit CEO James Park said in a statement to Business Insider. "We greatly appreciate the ALJ's [administrative law judge's] time and diligent work on this case. From the outset of this litigation, we have maintained that Jawbone's allegations were utterly without merit and nothing more than a desperate attempt by Jawbone to disrupt Fitbit's momentum to compensate for their own lack of success in the market."

A Jawbone representative provided a statement, saying that the company intends to ask for a review of the ITC ruling.

"We intend to seek review of today's ruling before the full Commission," the rep said. "The case in the ITC involved a very small subset of Jawbone's trade secrets asserted against Flextronics and Fitbit because of the limited jurisdiction of the ITC. Jawbone is continuing to pursue its much broader trade secret case against Fitbit, which is headed to a jury trial in California state court. The California court already has granted a preliminary injunction and rejected Fitbit's efforts to dismiss the case. Jawbone is confident it will prevail when the full scope of its claims is heard by the jury."

The ITC invalidated the last of Jawbone's patent claims in April, and the case came down only to Jawbone's accusation that Fitbit stole Jawbone's trade secrets.

Hosain Rahman, CEO and cofounder of Jawbone. REUTERS/Rick Wilking

Fitbit is the most popular wearable-device maker with almost 25% global market share at the end of the first quarter of 2016, according to research firm IDC. Jawbone's market share is too small to crack IDC's list of top wearable device makers.

The ITC decision was something Jawbone had hoped would be in its favor. This spring, Jawbone's CEO, Hosain Rahman, told Business Insider that he felt confident the ITC would ban Fitbit from importing its products, giving Jawbone the advantage by default.

But as the case dragged on, Jawbone has had its share of troubles. It raised a new round of funding — $165 million — in January at about half its previous valuation: $1.65 billion versus its previous valuation of $3.3 billion, according to Recode. Jawbone declined to comment on its valuation.

Sameer Samat, a Google executive hired as Jawbone's president, left the company and returned to Google in January after less than a year on the job.

Jawbone has also tried to sell its Jambox Bluetooth speaker business, a source familiar with Jawbone's plans told Business Insider earlier this year. But Jawbone's hope was that a buyer would pay a premium for the Jambox brand. The company hasn't had any luck finding a buyer, according to the source. A Jawbone representative says that there are several parties interested in the Jambox business.

Jawbone also hasn't released a new fitness tracker since spring 2015 and has sold inventory to a third-party reseller, a source told Business Insider this spring. The company says that it remains committed to making wearables. A Jawbone rep says the company still has fitness-tracker inventory.

Most of Jawbone's effort has gone into developing a new "clinical grade" wearable that can track health data like blood pressure, according to a source. Rahman, Jawbone's CEO, also told Business Insider this spring that Jawbone was interested in exploring clinical wearables.

But, Jawbone had problems getting the clinical device to work properly as recently as this spring, the source said. A Jawbone representative denies the company has had problems with the new wearable.